Posted 6/27/2020 20:53 (#8340055 - in reply to #8339746) Subject: RE: How much grain (2019) yet to market (survey)?
Fort Collins, CO
My clients, for the acres they carry with me, and as far as I know (since I can only track the exposure they share with me):
Have all of their 2019 marketed, hedged, or booked for their own feed usage.
Have their 2020 exposure as close to zero as is practical. This exposure changes frequently based on the sensitivity of their option positions and yield expectations, but we regularly rebalance to realign their exposure closer to zero.
Have roughly 10%-20% of their 2021 corn exposure covered, and none of their 2021 bean exposure covered.
This position isn't the result of some great foresight (believe me, I wish I could predict the future). Instead, it's my general goal to operate on a market-neutral basis (at least as far as is practical within a given marketing year). I strive for this because I don't believe I (or they) have a predictive advantage over the market most of the time. So, in general, I think it's best to try to carry as little exposure as possible. It's boring and mathematically complicated, but it tends to reduce overall swings in net worth. It's not for everyone - producers who have an advantage outguessing the market and/or enjoy emotional/equity swings (some folks do) will probably find market-neutral styles tiresome. I'm not trying to brag or advertise, being market-neutral limits upside potential- it's not a silver bullet (but what is?). Risk-management, at least when done right, will always limit upside in exchange for limiting downside.
I'm true-believer when it comes to market-neutrality, and I wish the idea was more broadly accepted and the information was more broadly available. If you've got questions, ask. I want everyone to get better at marketing and risk management - I hate seeing producers agonize over marketing decisions.
All of that said, please don't consider any of this to be advice or a recommendation to trade anything. Trading commodities can be dangerous, and losses can mount quickly - especially because of the leveraged nature of futures and options. I give away lots of free advice, so don't think this is an ad either. If you want to talk about markets, there aren't many things I enjoy talking about more, so feel free to drop me a line. If I have an answer, I'll share it, if not, I'll tell you that too.